Revised NAFTA agreement imposes U.S. internet rules on Canada

On December 5, the Wall St. Journal reported that U.S. Democratic House Speaker Nancy Pelosi was pushing to strip out sweeping legal protections for online platform giants such as Facebook and Google in the USMCA. USMCA is the name of the trade agreement replacing NAFTA. The Democrats control the House and the USMCA could not be ratified unless Democrats in the House passed it.

The legal protections, codified in the U.S. in Section 230 of its Communications Decency Act (CDA), shield online platforms from many lawsuits related to user content and protect them from legal challenges stemming from how they moderate content.

The S. 230 provisions ensure that platforms such as Facebook and Google are treated as platform "intermediaries" as opposed to "publishers" such as the New York Times or Globe and Mail. Such publishers can be held legally responsible for the material in their print and online versions. Facebook and Google cannot be held legally responsible for the content posted on their platforms under S. 230 of the CDA.

The big Internet firms had lobbied hard to include the immunity language in the trade agreement, seeing it as a way to extend to Mexico and Canada the broad umbrella of legal protection they enjoy in the U.S.

That's why removal of the provisions in the revised NAFTA would have been a huge blow for big technology companies like Facebook and Google.

But from the Democrats' point of view, the trade-pact language could also make it harder for Congress to scale back the current federal protections for internet firms in the future. The fear of having Congresses' hands tied on the issue was causing second thoughts in the House about including the legal shield—regarded by tech firms as a pillar of the internet—in a trade pact.

“There are concerns in the House about enshrining the increasingly controversial…liability shield in our trade agreements, particularly at a time when Congress is considering whether changes need to be made in U.S. law,” a spokesman for Mrs. Pelosi said at the time.

In early December, the internet content dispute was one of several issues clouding passage of the USMCA in the Democratic controlled House.

Another issue clouding the talks at the time was opposition from Mexico to labor inspections at Mexican factories, a key demand of U.S. Democratic lawmakers as it was the top priority of the U.S. (and Canadian) labour movements.

On December 19, the U.S. House passed the re-worked NAFTA with bi-partisan support. The liability shield protecting the platform giants remained completely intact as the Democrats decided that their immediate priority was the enforcement of Mexican labour standards and not regulatory issues related to the digital platforms.

How U.S. law allowed the platforms to dominate globally

The original legal protection for the giant internet companies  grew out of lawsuits against early online businesses over allegedly defamatory statements that users posted on online message boards near the dawn of the internet.

This shield from content legal liability is largely credited with fueling Silicon Valley’s rapid global growth and is at the core of the business models developed by companies such as Facebook and Google.

Essentially, the absence of content legal liability allowed billions of platform users to post content which, in turn, created a huge audience for the platforms to sell ads to (98% of Facebook's revenue comes from selling ads). Had platforms such as Facebook been legally liable for the content posted by its users, growth would have been much slower as the platforms would have had to screen the posts individually before "publication" - just like newspaper editors screen reporter's articles for potential legal problems. Obviously, this would have resulted in profoundly different business models for companies like Facebook and Google.

In recent years, lawmakers in both the Democratic and Republican parties have begun to question whether those sweeping federal protections still make sense, given the giant size of the platforms and concerns about illegal activity and foreign interference in elections.

For example, the immunity law has shielded online firms from liability for sex trafficking of children and other serious crimes by platform users.

In fact, it was only in 2018 that Section 230 was amended in the U.S. to remove online firms’ immunity for certain content related to sex trafficking. The huge platforms fought hard to hold on to the immunity related to sex trafficking on their sites but ultimately lost a massive lobbying battle that pitted them against an array of opponents, including law enforcement agencies, telecommunications, media and other firms who wanted the platforms legally liable.

After the big tech firms lost the fight over liability of sex trafficking, the lobbying battle shifted to the office of the U.S. Trade Representative - the department of the U.S. government which handles trade pact negotiations. Lobbyists and supporters of the tech companies had decided that the best way to guard against further erosion of content liability protections from Congress was to embed the liability protections in trade agreements.

Like the current U.S. law, the USMCA (again, the revised NAFTA) trade pact’s internet language would provide broad immunity to websites and other internet businesses for harms caused by their users’ content. It would also generally prohibit each of the three signing countries from adopting laws that hold platform intermediaries (again, Facebook, Google, etc.) as liable as content providers.

This is how a fact sheet from the U.S. Trade Office describes the internet related language in the USMCA:

"Limit the civil liability of Internet platforms for third-party content that such platforms host or process, outside of the realm of intellectual property enforcement, thereby enhancing the economic viability of these engines of growth that depend on user interaction and user content".

Should U.S. rules regulating the platforms be the world's internet regulation regime?

American trade negotiators have proposed including internet language similar to that included in the USMCA in other prospective deals, including with the European Union, Britain and members of the World Trade Organization.

The Trump administration’s trade push is the latest salvo in a global fight over who sets the rules for the internet.